House of the year, Australia: ANZ Bank

Asia Risk Awards 2020

Shayne Collins

Photo: Josh Robenstone

Like so many others this year, ANZ has worked hard to keep Covid-19 disruption to a minimum. Following the volatility that suddenly hit markets in March, ANZ moved quickly to stabilise the ship and, helped by its strong technology platform and broad distribution platform, the bank has been able to execute fairly large transactions, even as conditions worsened.

“The challenging conditions due to Covid-19 not only increased volatility across exchange-traded, over-the-counter and funding markets, but also had an impact on the day-to-day operations of many businesses,” says Shayne Collins, managing director of ANZ Markets. “At ANZ, we moved at pace to provide continued support for our clients during these uncertain times, while invocating business continuity plans across our business operations and ensuring the safety of our teams.”

He says that the bank’s “international network, market-leading solutions and the adaptability of our teams” are the main differentiators that have given it the competitive edge in the past and during the crisis.

As the leading foreign exchange provider in Australia by market share, ANZ has continued to provide solutions to both local and global partners. Deal volumes were up around 30% year-on-year in March and April, largely driven by the increase in volatility and the need to do more forex transactions. The bank says it processed more than 100,000 trades during this critical time.

Even as liquidity dried up, ANZ was still able to execute eight “material-size” transactions (meaning that they had the capacity to move the market). This was largely thanks to the bank’s algorithmic execution platform, which was launched in February last year and allows particularly large trades to be placed on the market in a more efficient way. The bank also says that this substantially helped to reduce execution costs for the clients, says Luke Marriott, global head of electronic fixed-income currencies and commodities.

The Australian bank sees algorithmic forex trading as a core growth area, pointing out that roughly 20% of forex trades in Australia are now executed via algos.

ANZ continues to pride itself on offering consistent, reliable and timely deal execution, in addition to market-leading forex spot, hedging, options, risk management, technology and research support.

“If you’re going to be taking up a customer’s time these days, you need to be sure that you really have a data-driven value-add,” says Marriott.

Marriott believes cross-border forex trading activity will increase in the coming months on the back of a relatively weakened Australian dollar and the bilateral trade agreements that are in place. This bodes well for the Apac-facing bank, says Marriott.

Building on strengths

This year ANZ has introduced a new team to help identify priority sectors and client opportunities that the bank should focus on.

“The primary objective of it is to build and develop multi-asset sales coverage,” says Damian Underwood, head of markets solutions, who leads the new team.

Each team member means they have a core competency in one asset class or advisory area, and more general knowledge in others.

The cross-expertise nature of the team means that knowledge can be pooled to provide simple solutions to complex problems, says Underwood. It also positions the bank well for the future, preparing them for handling more advanced solutions as the bank develops new technological capabilities across multiple disciplines, he adds: “When [the new tech solution for multi-asset sales] that comes up to speed, then they’ll be able to plug [the workflow] straight into it.”

ANZ claims that since the start of the pandemic it has led more Australia dollar issuance than any other bank on the market, including some quite significant corporate banking deals.

In April, while markets were still in the throes of Covid-19 volatility, ANZ acted as lead manager on a AU$1 billion ($736 million) dual-tranche domestic bond issuance for Australian supermarket chain Woolworths. The issuance consisted of a mix of five- and 10-year bonds, and was the largest corporate transaction in the country since 2017. It also acted as lead manager for bond offerings from the Australian Office of Financial Management’s AU$13 billion and AU$19 billion bond offerings in April and May.

In the first quarter of 2020, the bank helped an Australian client divest of an overseas asset for $2.5 billion using vanilla options. Given the uncertainty and timing of the cashflows, the client looked to buy topside options to protect themselves from a relatively weakening US dollar.

As part of the solution, ANZ onboarded a European entity in record time, with credit arranged and approved well ahead of the competitors. As the euro exposure was large enough to move markets, the trade was executed within a 24-hour window to minimise disruption and make sure that the client got the best price that they could.

The bank also considers itself the leading market maker in Australian dollars, with a robust solutions business across the interest rates spectrum. The bank also has good rates capabilities in G4 currencies, with 24-hour desks in Singapore and New York delivering rates hedging and access to senior market making capabilities in Asian time zones.

Paul White, head of the bank’s capital markets team, sees opportunity among the volatility in recent months, particularly in the public sector and rates market.

“There was quite a sharp turnaround [after March] and we’ve been able to execute large transactions,” he says, noting trade volumes are up 68% year-on-year in the Australian dollar domestic market, following the fiscal response to the virus.